DreamWorks Animation Rejects Paramount Offer to Extend Distribution Deal By One Year (Exclusive)

Paramount, whose deal with DWA runs through 2012, had offered to continue to release DWA movies for an 8 percent fee, though the studio wants to receive more in the future and DWA wants to pay less.

The relationship between DreamWorks Animation and Paramount Pictures continues to devolve. The Hollywood Reporter has learned that DWA's board has rejected an offer to extend its current distribution pact for an additional year, through 2013.

Paramount, whose deal with DWA runs through 2012, had offered to continue to release DWA movies for an 8 percent fee, though the studio wants to receive more in the future and DWA wants to pay less. The standoff between DWA topper Jeffrey Katzenberg and Paramount's Brad Grey intensified when Grey announced last month that it will launch its own animation division.

DWA declined to comment.

DreamWorks is said to be exploring other distribution options but an insider says at this point, "nobody has been pitched to do distribution" for DWA and therefore, no one has passed. Though some outsiders do not see an obvious contender to take Paramount's place, this source says the animation firm "is not quaking in its boots going, `Paramount is the only game in town'" because DWA can deliver solid fees on product that reliably grosses in the hundreds of millions of dollars.

Even the latest DWA film, Kung Fu Panda 2, perceived as a relatively disappointing performer, has grossed more than $600 million worldwide.

The DWA insider dismisses Paramount's decision to launch an animation division as a plan "to do low-rent movies."